IMPORTANT BANKING TERMS

MAT: Minimum Alternate Tax is the minimum tax to be paid by a company even though the company is not making any profit.

Future trading: It’s a future contract/agreement between the buyers and sellers to buy and sell the underlying assets in the future at a predetermined price.

Reverse mortgage: It’s a scheme for senior citizens.

Basel 2nd norms: BCBS has kept some restrictions on bank for the maintenance of minimum capital with them to ensure level playing field. Basel II has got three pillars:

Pillar 1- Minimum capital requirement based on the risk profile of bank.

Pillar 2- Supervisory review of banks by RBI if they go for internal ranking.

Pillar 3- Market discipline.

Microfinance institutions: Those institutions that provide financial services to low income clients. Microfinance is a broad category of services, which includes microcredit. Microcredit is provision of credit services to poor clients.

NPCI: National Payments Corporation of India.

DWBIS: Data Warehousing and Business Intelligence System, a type of system which is launched by SEBI. The primary objective of DWBIS is to enhance the capability of the investigation and surveillance functions of SEBI.

TRIPS: Trade Related Intellectual Property Rights is an international agreement administered by the World Trade Organisation (WTO) that sets down minimum standards for many forms of intellectual property (IP) regulation as applied to nationals of other WTO Members.

TRIMs: Trade Related Investment Measures. A type of agreement in WTO.

SDR: Special Drawing Rights, SDR is a type of monetary reserve currency, created by the International Monetary Fund. SDR can be defined as a “basket of national currencies”. These national currencies are Euro, US dollar, British pound and Japanese yen. Special Drawing Rights can be used to settle trade balances between countries and to repay the IMF. American dollar gets highest weightage.

LTD: Loan-To-Deposit Ratio. A ratio used for assessing a bank’s liquidity by dividing the bank’s total loans by its total deposits. If the ratio is too high, it means that banks might not have enough liquidity to cover any fund requirements, and if the ratio is too low, banks may not be earning as much as they could be.

CAD: Current Account Deficit. It means when a country’s total imports of goods, services and transfers is greater than the country’s total export of goods, services and transfers.

LERMS: Liberalized Exchange Rate Management System.